This proposal describes a research program to investigate the family processes that mediate the link between family income and children's competence. Our conceptual model draws upon the strengths of prior research in developmental psychology, family sociology and household economics. Specifically, we consider two factors that contribute to child development in the context of the family. First, we consider the inter- family differences in the availability of resources, i.e. the structural resources of the family. Structural resources may be material or non- material. The focal variable of this study, income and the persons who control its allocation are structural resources of a family. Second, we consider the intra-family processes that determine the child developmental outcomes. We refer to these resources as discretionary resources, since these processes reflect how the care providers allocate the available structural resources to children. Parenting styles, parent-child interactions, and learning opportunities provided to children are examples of discretionary resources that are proximate determinants of child competence. We also recognize that the level of child competence may influence the discretionary resources allocated to that child. In summary, we propose a structural model that describes the inter-family differences in availability of resources, intra-family processes that determine child competence, and the behavioral processes that determine the allocation of resources. This model also incorporates a recursive component to represent the interaction between the resources allocated to a child and his or her competence. We propose to use the National Longitudinal Survey of Youth (NLSY) and National Survey of Families and Households (NSFH) data to estimate the effects of the level of family income and the identity of persons controlling the income on intra-familial processes and on child developmental outcomes. These two data sets have complementary advantages for the proposed study. While the NLSY provides longitudinal family histories and comprehensive developmental assessments, the NSFH provides a national sample of children and detailed information on intra-familial processes.